OVERVIEW

The textile industry has an overwhelming influence in the economic development of India and is the second largest employer after agriculture. Through its contribution to the industrial output, employment generation and export earnings, the industry plays an important role in the Indian economy. The industry is estimated to be contributing about 10% of the aggregate country’s manufacturing production, 2% of national GDP, 15% of the country's export earnings, 7% of industrial output and provides employment to around 45 million people in the country.

Indian textile industry is multi-fibre based, using cotton, man-made and synthetic fibres, silk, wool, and jute. One of the key advantages of the Indian textile industry is abundant availability of raw material. Cotton is one of the major raw materials for the Indian textile industry. India is the second largest producer of cotton and silk in the world. The industry’s workforce is dominated by women with more than 70% of the workforce being women.

Indian textile industry is divided broadly in two segments. The organised sector consists of spinning, apparel and garments which apply modern technology for production and the unorganised sector which consists of handicrafts, handlooms and sericulture that are usually operated on small scale and through traditional methods.

In India, Kashmir, Ludhiana and Panipat account for 80% of woollens in India. Ahmedabad, Mumbai, Surat, Rajkot, Indore and Vadodara are the key places for cotton industry whereas Bihar is known for jute production, parts of Uttar Pradesh are known for woollen and Bengal is famous for cotton and jute industry. Tirupur, Coimbatore and Madurai are known for the production of hosiery and Bengaluru, Mysore and Chennai are known for silk fabrics.

According to the Index of Industrial Production (IIP), compiled by the Central Statistical Organization, Government of India, in November 2018, within the manufacturing sector, the manufacturing of wearing apparel has shown the highest positive growth of 22.1% corresponding to the same month of the previous year. During April-November 2018, it registered a growth of 8.4%. The IIP for manufacture of textiles also recorded a positive growth of 2.5% for the period April- November 2018.

During April-Nov 2018, man-made fibre production increased by 6% and filament yarn production decreased by 4%, compared to the corresponding period of the previous year. Additionally, during the same period, cotton yarn production increased by 4% and blended and 100% non- cotton yarn production increased by 3%. However, cloth production by mill sector decreased by about 7% during this period. The cloth production by decentralized sector increased by 4% during April-Nov 2018. Overall, the total cloth production during April-November 2018 increased by 3%, compared to corresponding period of the previous year.

Export

The exports of Fibre stood at US$1625.9 million in FY19 (April- Nov 18) as compared to US$ 1164.4 million in FY18 (April-Nov 17) and have registered positive growth of 39.64%. The exports of Yarn/ Fabrics/ Made-ups together also increased from US$ 9218.06 million in 2017-18 to US$ 10408.7 million in 2018-19 (Apr- Nov18).

Export by Commodity

Amounts in US$ millions

HS Code

Description

2014-15 Value

2015-16 Value

2015-16 Value

2017-18 Value

2018-19 Value*

50

Silk

135.60

104.50

86.70

77.03

56.86

51

Wool, Fine Or Coarse Animal Hair

177.21

178.20

160.44

164.41

121.61

52

Cotton

7717.96

7313.26

6611.07

7045.28

5136.18

53

Other Vegetable Textile Fibres; Paper Yarn And Fabrics

373.81

385.35

400.35

451.98

270.32

54

Man-Made Filaments

2392.29

2059.33

1988.41

2169.85

1511.85

55

Man-Made Staple Fibres

2179.39

2081.28

2143.13

2049.37

1271.19

56

Wadding, Felt And Nonwovens; Special Yarns; Twine, Cordage

338.27

506.21

350.43

390.89

277.81

57

Carpets And Other Textile Floor Coverings

1819.66

1726.76

1773.98

1711.18

1171.43

58

Special Woven Fabrics; Tufted Textile Fabrics; Lace; Tapes

404.98

352.20

373.60

376.20

249.94

59

Impregnated, Coated & Laminated Textile Fabrics

365.71

202.35

211.13

233.71

168.51

60

Knitted Or Crocheted Fabrics

256.88

241.86

284.52

342.93

278.38

61

Articles Of Apparel And Clothing Accessories, Knitted Or Crocheted

7654.62

7665.07

8223.75

7997.22

5006.19

62

Articles Of Apparel And Clothing Accessories, Not Knitted

9192.16

9324.61

9164.62

8724.54

4980.57

63

Other Made Up Textile Articles; Sets; Worn Textile Articles

4645.68

4586.53

4705.35

5013.36

3512.75

Total

37654.23

36727.49

36477.49

36747.94

24013.59

*Data till November 2018

Source: DGCIS

Foreign Direct Investments

100% Foreign Direct Investments is allowed in the textile sector under the automatic route. FDI in sectors to the extent permitted under automatic route does not require any prior approval either by the Government of India or Reserve Bank of India (RBI). The investors are only required to notify the Regional Office concerned of RBI within 30 days of receipt of inward remittance.

Outlook

Fabric manufacturers are expected to enhance their output in 2018-19. Along with a shift in lifestyle patterns, rapid urbanisation, increased retail penetration and growth in e-commerce is likely to motivate the consumers to spend more on apparel purchases. Other than the apparel segment, domestic demand for fabrics from the home textiles segment and technical textiles segment is also expected to rise. Moreover, the Government extended the special textile package to the made-ups sector in October 2016. This will assist home textile manufacturers to increase their exports.

Furthermore, the Government has come up with a scheme by the name of Power Tex India to develop the unorganised power loom sector in the country. As part of the scheme, the Government increased the subsidy for the upgradation of power looms. The Government also announced measures like interest subvention on working capital loans, margin money subsidy amounting to 20% of the project cost, setting up of yarn banks and common facility centres and financial subsidy for setting up of solar photo voltaic plants. This is likely to aid the growth in output of fabrics in the coming years.

In 2018-19, demand for yarn in the domestic market is expected to be healthy. This is likely to be backed by an increase in yarn purchases by the manufacturers of apparels, home textiles and fabrics. Exports account for close to one-fourth of the total yarn produced by the industry. Demand for yarn from the overseas market is also expected to recover. This is likely to be backed by a revival in demand for cotton yarn from China. The reserve cotton stock auctioned by China is of poor quality (older stock) and also highly priced. Therefore, Chinese textile mills are likely to import more cotton and cotton yarn from India. Overseas demand for yarn from other countries like Bangladesh, Pakistan, Egypt and Turkey is also expected to remain healthy.

Outlook for the industry is positive in medium term.

SELECT GOVERNMENT INCENTIVES

Under Union Budget 2018-19, Government of India allocated around Rs 7,148 crore (US$ 1 billion) for the textile Industry.

The allocation for Remission of State Levies (ROSL) is Rs 2,163.85 crore (US$ 334.24 million), which is expected to be beneficial for exporters of made-ups and apparels, as backlog will be cleared and working capital will be released.

The Government has also proposed to contribute 12% of the new employees’ wages towards Employee Provident Fund (EPF) over the next three years, which is expected to boost hiring in the apparel segment and has also extended fixed-term employment to all sectors.

The Government has allocated Rs 112.15 crore (US$ 17.32 million) towards schemes for power loom units.

The Government has allocated Rs 30 crore (US$ 4.63 million) for the Scheme for Integrated Textile Parks, under which there are 47 ongoing projects.

The handloom clusters under the National Handloom Development Programme will get Rs 396 crore (US$ 91.17 million) and the Integrated Processing Development Scheme will get Rs 3.8 crore (US$ 0.59 million)

The Government of India announced a Special Package to boost exports of textile industry by US$ 31 billion, create one crore job opportunities and attract investments worth Rs 800.00 billion (US$ 11.93 billion) during 2018-2020. The package offers labour law reforms, additional incentives under Amended Technology Upgradation Fund Scheme (ATUFS), enhanced duty drawback coverage and relaxation of Section 80JJAA of Income Tax Act. Further, the duty drawback rates under Merchandise Exports from India Scheme (MEIS) have been enhanced from 2% to 4% for apparel and made-ups from 1st November 2017. As of August 2018, the Special Package has generated additional investments worth Rs 253.45 billion (US$ 3.78 billion) and exports worth Rs 57.28 billion (US$ 854.42 million) since its launch.

The Government of India has taken several measures including Amended Technology Up-gradation Fund Scheme (A-TUFS). The scheme is estimated to create employment for 3.5 million people and enable investments worth Rs 950.00 billion (US$ 14.17 billion) by 2022.

To boost exports from India’s handicraft sector, the Government of India is in process of identifying 25 export oriented clusters, as of September 2018.

The Government of India approved Integrated Wool Development Programme (IWDP) to provide support to the wool sector starting from wool rearer to end consumer which aims to enhance the quality and increase the production during 2017-18 and 2019-20.

Technology Up-gradation Fund Scheme (TUFS)- Investment was made to promote modernisation and up-gradation of the textile industry by providing credit at reduced rates. A subsidy of Rs 1,400 crore (US$ 216.25 million) was released under this scheme in 2017.Under the Union Budget 2018-19, Rs 2,300 (US$ 355.27 million) crore have been allocated for this scheme.

SAATHI Scheme- The Union Ministry of Textiles, Government of India, along with Energy Efficiency Services Ltd (EESL), has launched a technology upgradation scheme called SAATHI (Sustainable and Accelerated Adoption of Efficient Textile Technologies to Help Small Industries) for reviving the power loom sector of India.

Merchandise Exports from India Scheme-The Directorate General of Foreign Trade (DGFT) has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for two subsectors of Textiles Industry - Readymade garments and Made ups - from 2% to 4%.

Scheme for Capacity Building in Textiles Sector (SCBTS)- The Cabinet Committee on Economic Affairs (CCEA), Government of India has approved a new skill development scheme named 'Scheme for Capacity Building in Textile Sector (SCBTS)' with an outlay of Rs 1,300 crore (US$ 202.9 million) from 2017-18 to 2019-20. The scheme is aimed at providing a demand driven and placement oriented skilling programme to create jobs in the organised textile sector and to promote skilling and skill up-gradation in the traditional sectors. Scheme for Capacity Building in Textiles Sector (SCBTS)- The Cabinet Committee on Economic Affairs (CCEA), Government of India has approved a new skill development scheme named 'Scheme for Capacity Building in Textile Sector (SCBTS)' with an outlay of Rs 1,300 crore (US$ 202.9 million) from 2017-18 to 2019-20. The scheme is aimed at providing a demand driven and placement oriented skilling programme to create jobs in the organised textile sector and to promote skilling and skill up-gradation in the traditional sectors.

Textile Incentives - The Textile Ministry of India earmarked Rs 690 crore (US$ 106.58 million) for setting up 21 readymade garment manufacturing units in seven states for development and modernisation of Indian Textile Sector.

Khadi App Store - The National Board of Khadi and Village Industries Commission (KVIC) launched a mobile phone application for locating 4,000 Khadi stores in India.

SELECT EXPORT MARKET REGULATIONS

The Textile Fiber Products Identification Act, the Wool Products Labeling Act, the Fur Products Labeling Act, and Federal Trade Commission require that most textile wool, and fur products have a label or tag disclosing the fiber or fur content, the business name or other identification issued and registered by the Commission of the manufacturer, importer, distributor, or seller, and the country of origin. Wearing apparel must have labels specifying content and instructions for care. All textiles must have either labels indicating the country of origin or, if this is not feasible, (yarn, thread, wool) be packaged in such a way that country of origin is discernable to the ultimate purchaser.

European Union

Textile products may only be placed on the European Union (EU) market provided that they are labelled, marked or accompanied with commercial documents in compliance with Regulation (EU) No 1007/2011 of the European Parliament and of the Council.

The main purpose of the Regulation is to ensure that consumers, when purchasing textile products, are given an accurate indication of their fibre composition.

The placing on the EU market of textile and leather articles containing certain chemical substances, group of substances or mixtures are prohibited or severely restricted, in order to protect human health and environment, according to provisions listed on Annex XVII to Regulation (EC) No 1907/2006 of the European Parliament and of the Council (REACH Regulation).

Exim Bank has taken this initiative to add to the ongoing efforts towards reducing the asymmetry in information availability of trade finance and credit insurance facilities amongst MSME entrepreneurs. Though there are a few platforms which provide data and information to exporters/importers, this Exim portal supplements export-import related data.